Friday, November 09, 2012

Wastage

A few weeks ago, I chanced to be in Saint Pierre and Miquelon, a French colony of 6,000 people on a couple of treeless rocks in the North Atlantic. Every electric line is underground. Indeed, the droll demoiselle who leads tours of the islands makes a point of amusingly drawing American visitors’ attention to this local feature.

If you’re saying, “Whoa, that sounds expensive,” well, our government is more expensive than any government in history — and we have nothing to show for it. Imagine if Obama’s 2009 stimulus had been spent burying every electric pole on the Eastern Seaboard. Instead, just that one Obama bill spent a little shy of a trillion dollars, and no one can point to a single thing it built.

Naturally Dalton McGuinty isn't in the trillion dollar deficit category. Ontario's projected $15.2 billion deficit for fiscal 2012-13 is an Obamaesque rounding error. This is not quite for lacking of trying. American fiscal incontinence is backed by the US dollar's status as the global reserve currency and a considerable nuclear arsenal. The provincial Grits have only the Dalt's dour visage to assuage global financial markets.

Yet the Steyn's observation about how very little has been built in the Obama Years applies just as much to Ontario under McGuinty. This seems to be a phenomenon of the advanced welfare state. At first governments built or subsidized the construction of critical pieces infrastructure such as roads, canals and railways. Say what you will about FDR, Eisenhower and LBJ but they left something behind. You can point of dams, interstate highway networks and the odd moon shot as tangible accomplishments.

Same goes in Ontario. While Messers Frost, Robarts and Davis moved the province steadily to the Left over their four decades in power, the practical benefits of provincial funding can be seen, touched and are used today. Ontario without its 400 series highways, Toronto without its subway system and Ontario Hydro without its nuclear generators, would be pale shadows of their current selves. What the old style statists, whatever their political stripes, left was a genuine legacy. What does Dalton McGuinty leave behind?

It is granted that highways, subways and nuclear generators would be better built, better financed and better administered under private sector control. Government action comes in three types 1) Necessary and probably impossible to replicate by the private sector (police, courts) 2) Things and services which are useful but delivered sub-optimally by the public sector (mass transit and highways) 3) Things and services which are not useful and should not be provided (much of the regulatory state).

The McGuinty Years have seen little of the first two types and rather a lot of the third. In fiscal 2004-05 the province spent $79.4 billion. By 2012-13 provincial spending will reach $126.4 billion. That's a $47 billion spending increase in less than a decade. That's an awful lot of moolah with very little to show for it except some very bloated union contracts which are, quite belatedly, being slightly trimmed.

But let's say you were an old fashioned sort of statist. An advocate of the concrete and steel liberalism that went out of fashion with tail fins and poodle skirts. What could you by for $47 billion? Rather a lot of genuinely useful stuff:

Using an estimate from Metrolinx, the provincial transit agency, he says the city could take the Sheppard line from Downsview in the west to Scarborough city centre in the east for $3.7-billion. That is $1-billion less than the TTC’s estimate.

That's one subway line in Toronto. Even if you assume that the actual construction costs would be double the estimates, not unheard of in government building projects, that would still put it at under $8 billion. That would leave another $39 billion for roads, water treatment plants, upgrading the electrical grid and building more practical power stations, as opposed to bird blenders. Useful stuff that a province with an expanding population will need in the decades ahead. There might even be some money left over to fix the stuff we already have.

Calls for more money to be invested, a much abused word in government press releases, in public infrastructure are usually shrugged off with talk of strained budgets. Yet over the past decade the provincial budget has grown by more than 50%, far faster than either population increase (less than 10%) or inflation could justify. There is plenty of money that has been misspent that could, with a bit of foresight, have been applied more wisely.

So why hasn't it?

The simple answer is that bridges and subway trains don't vote, nor is financing them much of a vote winner. In modern Ontario infrastructure is taken for granted. When the first subway lines and superhighways were built they were a clear improvement over what came before, which was often little better than a two lane roadway or a solitary streetcar line. Another subway would certainly ease congestion, but not in any dramatic way. Even several subway lines might knock a few minutes off the commute, an improvement that would be real and measurable yet hard to notice by ordinary voters.

What is noticed by voters is strikes. Teachers, nurses and scores of other employees in what is politely termed the wider public sector. The easiest and simplest thing to do is to buy the silence of these and countless other rent seekers. Doing something useful will take years and be noticed by relatively few. Doing something politically expedient will be noticed by many and take only a short while to implement.

The problem is not so much Dalton McGuinty, who is merely a very obnoxious symptom, but the logic of public funding. Businesses spend and invest on the basis of an expected rate of financial return. Politicians spend and invest other people's money based on an expected political return. This is why politicians promise absurd things that even they know are nonsensical, because it wins them votes. Lots of votes. Just look at the billions wasted on windmills, all to assuage urbanites who wanted to feel good about being environmentally sensitive, regardless of the damage done to actual wildlife.

Getting McGuinty out of power is a good first step. A much better step would be to get government out of public works.

Comments

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“Calls for more money to be invested, a much abused word in government press releases, in public infrastructure are usually shrugged off with talk of strained budgets.”

Progressive governments like McGuinty’s “invest” in unions (instead of subways) because unions are a source of campaign funds and even more importantly they are volunteer boots on the ground which has a value impossible to put a price tag on.

For example, a few years ago when John Tory decided to give up his safe seat to run against Education Minister Kathleen Wynne (the heir apparent to the LPO leadership) the dynamics were impossible to overcome. The teachers’ union leader would call upon teachers to take a day off to canvass with Wynne. What was John Tory going to do? Call the President of Rogers and say please send some of your staff out today to help me canvass?